There are lessons to be learned from the collapse of Kids Company, but we risk putting too much emphasis on one very atypical charity, says Kirsty Weakley.

A lot has been written about Kids Company. An awful lot. Including by us.

The difficulty is that while it's hard to stop talking about this compelling subject, we risk doing more harm than good. There are useful lessons, but we need to press hard to make sure the government doesn't start introducing sweeping changes based on one unusual charity.

Kids Company’s collapse in the summer was so dramatic, capturing the attention of the media, public and politicians in way that no-one could have predicted, and the ramifications are likely to be felt long after Kids Company becomes a distant memory.

It is easy to see how this happened. For the media it was a perfect storm of a story, involving children, sex, drugs, colourful personalities, politicians and the BBC, which kept on giving (as the 80-plus Civil Society News stories alone will show).

The public felt betrayed, by both the charity and those who were supposed to be monitoring it (though they may not be able to tell you who they think that is) and concerned for the children left out in the cold by the collapse of a service that they relied on. And politicians were embarrassed that the charity collapsed on their watch, and that it appeared that Kids Company was wasting money not helping anywhere near the number of children it claimed.

The situation was so serious that two committees of MPs announced inquiries, the Charity Commission opened a statutory inquiry and the police said they were investigating allegations.

Both the Public Administration and Constitutional Affairs Committee, which published its report today, and the Public Accounts Committee, which made its recommendations last year, concluded that there has to be a radical change in how the government makes grants to all charities. The Treasury has promised to create a central register of government grants.  

Today’s report from PACAC draws wider conclusions than the PAC did, blaming trustees first and foremost but also the regulator, government ministers and audit firms who missed the warning signs. Chair of the committee, Bernard Jenkin called for a “radical change in our approach to charity regulation at every level”.

Reading the PACAC report it is hard to avoid the conclusion that the relationship between charities and government is on the verge of fundamental change. To frame this just in terms of what went wrong at Kids Company would be damaging.

Was Kids Company really an anomaly?

Kids Company may have been an aberration, both in how the charity behaved and in the unique relationship it enjoyed with successive governments.  

However not everything about the charity was unique and the charity sector cannot bury its head in the sand and grumble that the government is using an example of one bad egg to make things more difficult for charities to obtain grants.

Last week I glanced at the accounts for a local youth charity, which is still run by its founder – albeit much smaller than Kids Company and with no central government grant - that used almost identical wording to one Kids Company set of accounts, ie: “We have no reserves because we’re spending all our money on the kids.” The resemblance to Kids Company was eerie and the sector has to accept the reality that there are others like Kids Company out there – they just might not be operating on quite the same scale. Yet.

Where Kids Company was different was how big it was able to get to without being checked. The biggest surprise to me when Kids Company collapsed this summer was not that it was badly run, but just how big it was.

For charities, particularly smaller charities working at the frontline in a deprived community, it will require a culture shift to move from a hand-to-mouth existence to a more stable footing with an exit plan, as PACAC suggested.

Blaming trustees

Trustees are really getting attacked.  In its fundraising report last week, PACAC was clear that trustees have to accept ultimate responsibility for the financial health of their organisation.

While there aren’t many who would disagree with that sentiment, it is already hard enough to convince people to give up their time before even getting into the debate about improving diversity on boards.

As a solution PACAC wants the Charity Commission to provide more guidance.

All of this will cost money. PACAC accepts this and has suggested that the government look into it. And given how unequivocal the government has been about not increasing the Charity Commission’s budget it seems unlikely that this money will be forthcoming.

Change to the government grant system could be a good thing for charities

PACAC’s report highlights just how little attention government departments were paying when they handed out grant after grant to Kids Company, so reducing ministerial discretion may not be a bad thing.

All of the warning signs were there in its annual report and accounts. And it is difficult to see how any other charity would have been allowed so many chances to get it right.

It has been suggested that the money given to Kids Company could have been better spent by other charities who were not even considered. The Cabinet Office has tasked Rob Wilson with reviewing how it makes grants under section 70 of the Charities Act.

A tightening up of government procedures might make it harder to get a grant, but it could also make it fairer.

But any sweeping changes to how charities are regulated or funded should be done after broader consultation, and not because of one case study. 

More than just Kids Company

While the PACAC report and the PAC report before it focused on the collapse of Kids Company, the conclusions they draw and any subsequent action will have a lasting impact on the charity sector.

To avoid making changes that will damage the charity sector it is important that both government and the sector acknowledge which lessons can be applied broadly, and which cannot.

So it probably isn’t time to stop talking about it just yet. But we must not define the whole regulation narrative based on one example, otherwise charities and government risk doing more harm than good.